This article, the first of two parts, provides an overview of the International Standard on Sustainability Assurance 5000, which is included in Syllabus Area D of the Professional Diploma in Sustainability.

Introduction

This article outlines the key principles of ISSA 5000 General Requirements for Sustainability Assurance Engagements (ISSA 5000). It considers its application and objectives, provides a brief overview of acceptance of a sustainability assurance engagement, and its planning.

The final version of ISSA 5000 was issued by the International Auditing and Assurance Standards Board (IAASB) in November 2024. There are two key principles to highlight:

1. Framework neutral

ISSA 5000 is an ‘overarching standard’ which can apply to any of the sustainability reporting frameworks in use. Rather than writing a standard specific to each framework, ISSA 5000 aims to provide guidance to all sustainability assurance providers. This is important as many entities may operate under different sustainability reporting frameworks simultaneously depending on their place(s) of operation and size.

ISSA 5000 covers sustainability information included as part of the annual report and sustainability information produced as a separate report. However, ISSA 5000 does not cover any sustainability information which is required to be reported under a specific accounting standard, and the auditor should continue to follow the relevant International Standards on Auditing (ISA) when dealing with this information.

2. Application

The second key principle is that ISSA 5000 applies to all sustainability assurance practitioners, not just assurance practitioners who are professional accountants, as long as:

1. They adhere to relevant ethical requirements, and
2. They apply a system of quality management which is at least as rigorous as those used by accounting practitioners.

This means that non-accountancy professionals can use ISSA 5000, for example, experts in environmental matters.

Effective date

ISSA 5000 will apply for periods starting on or after 15 December 2026 in most jurisdictions, although this is dependent on the local bodies in those jurisdictions. Therefore, for most entities the year ended 31 December 2027 will be the first reporting year impacted by these new sustainability assurance regulations.

Once ISSA 5000 has been adopted by a jurisdiction, ISAE 3410 Assurance Engagements on Greenhouse Gas Statements and ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information will no longer apply for assurance engagements.

Objectives

In conducting a sustainability assurance engagement, the objectives of the assurance practitioner are:

• To obtain reasonable or limited assurance, as applicable, about whether the sustainability information is free from material misstatement.
• To express a conclusion on the sustainability information through a written report that conveys a reasonable or limited assurance conclusion, as applicable, and describes the basis for that conclusion.
• To communicate further any matters required by ISSA 5000 and any other relevant ISSA.

A primary reason for the introduction of this standard is to bring clear guidance over the assurance that can be provided over sustainability information reported by entities of all sizes and complexity. This seeks to improve the confidence users can have in this information.

Ethics

Another key development is the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) has been updated to cover sustainability assurance with the creation of Part 5.

Part 5 of the IESBA Code is applicable to all sustainability assurance practitioners.

Part 5 requires all sustainability assurance practitioners to apply the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour - and address any threats to compliance with the fundamental principles. This ensures that all engagements carried out in line with ISSA 5000 will be performed within the same ethical framework, even if they are carried out by non-accountancy professionals.

Professional competence and due care is a key consideration for sustainability assurance, and practitioners must thoroughly evaluate their ability to perform a quality assurance engagement before accepting the engagement as it may involve reporting on new areas, where they have no previous experience. This may involve ensuring there is sufficient expertise in the firm, using an appropriate expert, or training employees.
 

Quality management

Effective assurance requires the assurance practitioner to implement suitable quality management for the engagement. For this reason, ISSA 5000 requires that the quality management guidance for professional accountants contained in the provisions of the International Standard on Quality Management (ISQM 1) are also applied to sustainability assurance engagements, or requirements which are at least as demanding as ISQM 1 for those practitioners who are not professional accountants.

In short, sustainability assurance practitioners are required to have quality management procedures, at both the engagement and firm level, which ensure compliance with professional standards, legal and regulatory requirements, and reviews of reports issued.

Overall, the aim is that through applying the ISQM 1 and the relevant ethical standards, sustainability assurance engagements are carried out at the same level of professionalism as financial statement audits.

Acceptance of the engagement

In carrying out these engagements to a suitable level of quality, ISSA 5000 requires assurance practitioners to consider certain acceptance considerations (para. 26 of ISSA 5000) and to evaluate whether certain preconditions are present (see paras. 75-80) as part of their engagement acceptance procedures. Matters to consider include:

1. Ethical requirements;
2. Competence and capabilities (including time and resources); and
3. Establishing that the preconditions for an assurance engagement are present; and
4. Confirming that the terms of the engagement are agreed (including the practitioner’s reporting responsibilities).

Before accepting the engagement, it is vital the assurance practitioner ensures it has the resources to carry out the engagement. This includes not only suitable competence and capabilities in sustainability assurance, but also sufficient time to complete the engagement. Assurance firms will have to provide appropriate training to ensure employees have the necessary skills.

With regards to the terms of the engagement and the level of assurance to be provided, reasonable assurance provides a higher level of assurance than limited assurance. Reasonable assurance provides a positive confirmation that the sustainability information is prepared, or fairly presented, in all material aspects, in accordance with the applicable criteria.

Limited assurance, however, provides a negative confirmation that nothing has come to the assurance practitioner’s attention to indicate that any sustainability information is not prepared, or fairly presented, in accordance with the applicable criteria. Limited assurance requires a reduced degree of testing, and it is therefore important that it is clear to both the client and the users of the sustainability information what level of assurance is to be provided.

In very simple terms, ISSA 5000 requires the assurance practitioner to fully understand what is being reported, how it is being reported, and the level of assurance required. Once they understand this, they should ensure they have the resources and ability to carry out this work before accepting an engagement.

Materiality and planning

Materiality is crucial during the planning stage of a sustainability assurance engagement because it forms the foundation for determining the scope and procedures of the engagement.

Materiality is also applied by the client in preparing and presenting the sustainability information, as discussed below. The practitioner must understand the client’s materiality assessment process, but this understanding is distinct from their own approach to materiality in the assurance engagement.

1). The client’s materiality assessment and its relevance
The decision to publish information about sustainability, and the way in which it is measured and presented, is made by management (based on the applicable sustainability reporting framework), therefore the assurance practitioner will need to assess what management has deemed to be ‘important’ (material) to disclose.

It is vital the assurance practitioner understands the client’s materiality assessment process as this will be revisited throughout the assurance engagement. For example, when obtaining an understanding of the client’s internal controls for the sustainability information. In addition, the client’s materiality assessment process is relevant for the assurance practitioner’s application of materiality.

2). The assurance practitioner’s materiality assessment
The assurance practitioner’s materiality assessment focuses on considering or determining materiality for the purpose of developing the approach to obtaining evidence and evaluating identified misstatements of the sustainability information.

Materiality is considered from the perspective of the intended users, and it guides the assurance practitioner in assessing which misstatements could mislead users, or impact decision making.

Given the nature of sustainability information i.e. qualitative and quantitative disclosures, it is common for assurance practitioners to consider and/or determine multiple materialities (i.e. for each disclosure or a group of disclosures). This will typically depend on the information needs of the intended users of each disclosure and their tolerance for misstatements.

The assurance practitioner’s materiality assessment focuses on:

• considering materiality for qualitative disclosures (see para. 98a and A300 of ISSA 5000 for further guidance); and
• determining materiality for quantitative disclosures (see para. 98b and paras. A301-A305 for further guidance). For example, an assurance practitioner might set a materiality threshold of 5% of Scope 1 emissions, meaning any misstatement exceeding 5% would be considered material.

In addition, for quantitative disclosures, ISSA 5000 requires the practitioner to determine performance materiality (set below the materiality threshold to reduce aggregation risk to an appropriately low level). ISSA 5000 clarifies this involves exercising professional judgement according to the assurance practitioner’s understanding of the client, which is continually updated during the risk assessment procedures (see paras. A307 to A311).
 

Risks of material misstatements

During planning, ISSA 5000 requires the assurance practitioner to design and perform risk assessment procedures to identify and assess the risks of material misstatement of the sustainability information. The nature and extent of these procedures varies depending on whether the engagement is to provide limited or reasonable assurance:

• Limited assurance requires the assurance practitioner to design and perform risk assessment procedures sufficient to identify and assess risks of material misstatement at the disclosure level.
• Reasonable assurance requires the assurance practitioner to design and perform risk assessment procedures sufficient to identify and assess risks of material misstatement at the assertion level.  

ISSA 5000 contains guidance on the events or conditions which could give rise to a material misstatement. These may include complexity, judgement, change, uncertainty, or susceptibility to misstatement due to management bias or fraud. Specific examples of where or how material misstatements in sustainability information may arise are also provided (see paras. A323, A473, and A479).

With ISSA 5000 being a new standard there are several factors which will need to be considered in the early years of an engagement as they are likely to have an impact on the risk of material misstatements in disclosures, such as:

• Risks of omissions or errors in comparative information (as in many cases there will have been no assurances over this information)
• Management bias in estimates (as much sustainability information will come from estimates)
• Reliance on third party information (as a considerable amount of sustainability information will be generated by third parties, for example greenhouse gas emissions data).
• Internal control weaknesses for sustainability information as the controls may not be as robust as those within the financial reporting system.

To respond to any identified risks of material misstatements, the assurance practitioner must design and perform further procedures.

Key takeaways

ISSA 5000 represents a significant development in providing guidance on assurance of sustainability information. While there are extensive requirements included in the standard, the key headlines we have discussed are:

• Ethical and quality management requirements apply to all sustainability assurance engagements.
• Before accepting a sustainability assurance engagement, practitioners should ensure they fully understand the scope of the engagement and have the necessary resources to carry it out.
• As the nature of sustainability disclosures can vary widely, it is essential the assurance practitioner sets an appropriate basis for materiality and fully plans an effective approach to gather sufficient appropriate evidence.

The second article in this series considers evidence, completion, and reporting in sustainability assurance engagements.

Further resources:

• Ethical dilemmas in sustainability reporting | ACCA Global 
  
• A case study: Demystifying materiality in accordance with ISSA 5000 | ACCA Global
• ISSA 5000 Frequently Asked Questions: The Application of Materiality │IAASB

Adapted from an article written by a member of one of ACCA’s examining teams